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On January 20, US Xpress Enterprises CEO Eric Fuller detailed the findings of an economic report his company released on the trucking industry.
The US Xpress 2021 economic forecast has highlighted several major trends for the coming year. The report says further reduction in truck loading capacity, heavy freight activity, tariff increases and resolution of the impact of the coronavirus are expected.
“We will come out of this pandemic,” Fuller told Transport Topics. “I’m hoping that at some point in 2021 there will be some semblance of normalcy. What that might look like is sort of still up for debate. What we saw in 2020 was a real change in models. demand, and that was really obviously related to social distancing. “
The report predicts that fewer drivers and more stimulus funds will continue to reduce truck loading capacity. A reduction in CDL training and other factors resulted in a decrease in the number of drivers as the industry entered the new year. At the same time, stimulus spending could also deter new drivers from entering the industry while keeping many current drivers at home.
The report noted that the recent increase in Class 8 orders suggests that additional truck loading capacity will soon be realized. He cited ACT Research, which found that November’s orders were up 33% from the previous month. But the report warned that driver shortages will persist for the foreseeable future.
“We also had schools closed for a while,” Fuller said. “Many schools have not reopened, and those that have reopened are operating at half capacity. So less drivers overall on the market from this point of view.
“The things that are on our radar from a supply side in 2021, related specifically to these expense bills, are that the stimulus is likely to keep people out of the industry.”
The report notes that freight activity will remain robust, but economic growth is expected to slow. He noted that the pandemic and a slower-than-expected vaccination rollout would temper growth for the first half of the year. But inventory restocking efforts, holiday shopping returns, and e-commerce will help support freight demand.
The report also says that, as coronavirus cases are expected to slow, a more steady recovery will take place in the second half of the year.
“I think the big question in 2021 from a demand perspective is how that demand changes,” Fuller said. “We think we’re probably likely to see the effects of the pandemic until early to mid-fall. But I hope that at some point in this period we start to have a little turn towards some kind of normalcy. “
He added that the pandemic has created a big change in shopping habits. People weren’t able to dine, be entertained, or travel as much as before. This has resulted in an inordinate demand for products such as groceries. Fuller predicts that at some point there will be a pendulum swing in demand for services and experiences.
US Xpress also predicts that there will be continued increases in contracts and spot rates over the next year. The carrier expects increased freight demand and reduced capacity to increase contract rates by 8-15%. Spot rates are likely to trend higher until the fall months.
Fuller also noted that there are political considerations. Democrats have gained presidency and control of Congress, which means a new list of priorities and likely increased spending. This could have a huge impact on trucking.
“In addition to the pandemic factors, you have several things that are likely to play out over the next six months,” Fuller said. “One being a big stimulus bill. Now that Democrats control both Congress and the Presidency, you are likely going to see a lot of people attached to this stimulus bill. It could run into the trillions of dollars. This is likely to come with big payouts to consumers. This will generate more purchasing power.
Fuller added that this will have an impact on freight demand. He also sees a likelihood of a big infrastructure bill that could impact demand closer to next year. Fuller also hopes this will be enough to offset any potential economic downturn down the road.
US Xpress is ranked 24th on the Transport Topics Top 100 list of largest for-hire carriers in North America and 31st on the Transport Topics Top 50 list of largest logistics companies.
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